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Friday, 30 November, 2001, 10:51 GMT
Nitel price tag raises doubts
Woman making a phone call in Nigeria
Nigeria's phone network is one of the worst in the world
As the dust settles on the sale of Nigeria's telecoms company Nitel, some analysts have questioned whether the sale justified the $1.3bn (915m) price tag.

The winning consortium - a mix of Nigerian finance and Portuguese technical expertise - has 90 days to pay for its 51% stake of Nitel.

"If you measure the valuation put on Nitel, by most international standards, it is significantly in excess of what people would say Nitel is worth," a financial adviser to the winning consortium told the BBC's World Business Report.

Some of the consortia's advisers have even raised doubts as to whether this amount of money can be raised locally, given the lack of international interest in financing the deal.

In theory, the poor state of Nigerian telecoms should mean that even with relatively little investment, the winning consortium will be able to boost revenues.

True value?

The winning consortium is International Investors of London (IIL).

The finance is understood to have been provided by Nigeria's Chief Bode Akindele.

Tecnologia de Communicacoes (TDC), a subsidiary of Portugal Telecom, will provide the technical expertise without any cash investment.

Wednesday's signing followed delays, centring on disagreements over penalty clauses, which threatened to scupper the agreement, leaving the purchase open to a lower bidder.

Some analysts say they thought a price tag of between $600m and $700m would have been a better indication of Nitel's true value.

Tani Fafunwa, analyst at Nigerian telecoms consultants Resourcery, said: "I am worried that too much was paid. This is not the government's fault. But the fear is that the $1.3bn that the government got, would have been of more economic benefit to Nigeria if it had gone straight into developing the network and setting up the GSM mobile network. "

Nigerian capital

The rules anticipated that large international operators would want to buy a stake in Nitel, but the four consortia listed were local business groups - eager to have a stake in a prestige asset - which had linked up with international operators to provide the technical expertise.

The fact that local consortia can fund this is testament to the amount of capital in Nigeria, home to one of the best performing stock markets in the world.

Such is the parlous state of Nigerian telecoms that relatively small upgrades could increase revenues.

"The call completion rate in Nigeria is one of the worst in the world, Nitel earns a significant amount of money from incoming international calls, that number could be increased substantially just by fixing the gateway, which is not a huge investment," Chief Bode Akindele's adviser added.

Nigeria's phone network, with only 400-500,000 lines operational at any one time, ranks as one of the worst in the world.

Even those among Nigeria's 1.2 million population who do have lines often suffer problems of fraud or call diversion.

IIL expects to roll out 1.4 million new lines within the next five years, and win 1.5 million subscribers to a mobile phone network.

 WATCH/LISTEN
 ON THIS STORY
Chief Bode Akindele's financial adviser
"Nitel is viewed as a prestige asset"
See also:

23 Nov 01 | Business
Nigeria delays telecoms sale signing
19 Nov 01 | Business
Nigeria set to complete telecom sale
05 Nov 01 | Business
Nigeria takes bids for telecom sale
15 Oct 01 | Business
Nitel launches GSM amid storm
28 Aug 01 | Business
Nigeria's digital mobile bonanza
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